Given the gap between Nifty May, June and July Futures, a calendar spread strategy should work well this week
Since the April settlement has just been completed, there is still a certain lack of liquidity in the May and June options market. That could give rise to a few profit opportunities with a degree of safety attached as the liquidity improves. Most of the action must be concentrated on May instruments because even June is low liquidity as yet.
As far as market perspective is concerned, there are three likely possibilities regarding market direction in the next week. The most likely possibility is that the Nifty will trade between the 915-940 range because there is good support at the 915-920 level.
The second possibility is that it will drop below 915, in which case, it could drift all the way down to 850 levels over the next month. The third and least likely possibility is that there will be a sharp technical recovery that carries the Nifty to 965 or even beyond around the 990 level. Summing up, the Nifty could travel plus-minus 70 points but range-trading or downward moves are most likely.
Nifty Positions: In two of those three circumstances, buying the May Nifty Future or even the June Nifty Future should be profitable. The June Nifty looks like a stronger buy due to the carry relationship between the three months. With May Nifty traded at around 929, June Nifty is also at 929 levels, while the currently illiquid July Nifty is at 936.
A calendar spread buying June and selling July is possible - the gap between the two should narrow with either June appreciating or July declining, or ideally, both moving in the desired directions. One problem is July
